Sanofi $20bn Genzyme bid nears finale

Elizabeth Fournier
EXECUTIVES at Sanofi-Aventis and Genzyme were last closing in on a takeover deal worth nearly $20bn (£12.4bn), ending months of speculation surrounding a potential agreement.

Under the slated agreement, Sanofi is expected to pay around $74 per share for the US biotech company, valuing it at $19.2bn. The figure is a five-cent-per-share increase on the approach made by Sanofi chief Chris Viehbacher in August last year, which was rejected outright by Genzyme boss Henri Termeer.

The deal would also incorporate a contingent value right (CVR), which could add a tradable value of up to $5 to $6 a share for the acquired shareholders, dependent on the performance of Genzyme’s experimental new multiple sclerosis drug Lemtrada.

Though sources close to the deal said that the terms of the takeover had already been agreed, a final announcement could be delayed until later this week, but is likely to come ahead of Sanofi’s annual results on Wednesday.

Analysts say the CVR is a sensible way to offset doubts over Genzyme’s future performance, despite the US company projecting peak annual sales of $3.5bn.

“They are not paying upfront for a lot of uncertainty – that’s important,” said Helvea analyst Karl-Heinz Koch. “At $74 plus a CVR, the deal terms would be within reason...The earnings leverage to Sanofi is substantial.”

The merger talk surrounding Genzyme has boosted the company’s share price in recent months, with its stock closing at $73.40 on Friday, a 47 per cent increase on July last year, when its share price struggled to top $50.

While Sanofi’s initial $18.5bn proposal was deemed “opportunistic” by Termeer, the last couple of weeks have seen intensive two-way discussions between the companies’ boards, with the revised bid running slightly above Genzyme’s market cap and the CVR adding value for its shareholders.

Sanofi sought advice during negotiations from JP Morgan, Evercore Partners and Morgan Stanley, with Genzyme turning to Credit Suisse and Goldman Sachs.

Sanofi’s acquisition of Genzyme, which specialises in developing so-called orphan drugs for rare diseases, comes at a time when the pharmaceutical industry as a whole is being forced to diversify to remain relevant.

The French pharmaceutical giant relies on its pipeline of prescription and over-the-counter drugs, which are dependent on patents to avoid competition from generics.

But rights on its blood-clotting duo Plavix and Lovenox will expire in 2012, with rival Teva announcing in late January that the US Food and Drug Administration is poised to approve its Lovenox generic.

The UK pharmaceutical industry also took a hit last week when Pfizer confirmed plans to shift its R&D operations to the US after more than 50 years. Chief executive Ian Read signalled this was part of a “fundamental change in culture” as the company moves to offset losses expected when its blockbuster cholesterol pill Lipitor faces generic competition for the first time in June.